Income drawdown driving equity release market boom

The equity release market has witnessed a “fundamental shift” with 75 per cent of the market using drawdown products, said a recent research by Key Retirement Solutions.

The equity release market monitor published today by the equity release adviser firm showed the amount released and sales of equity release plans grew by 5 per cent in the first half of 2011.

The number of total plan sales for the first half was also robust and was recorded at 10, 448; however, the figures failed to reveal the amount of equity release money consumers did not take.

“The phenomenon of drawdown has changed the market. If you go back to 2005-06 drawdown was relatively low value by comparison, but since then we have seen draw down increasing which has driven down the amount being borrowed at inception,” said Dean Mirfin, group director of Key Retirement Solutions.

“At the same time as draw down has increased in popularity overall borrowing has come down”, he added.

As a result, the headline figures for overall borrowings failed to reveal the full extent of resurgence of the equity-release market, said Mr. Mirfin.

“What we have seen is a decline on overall lending but we have focused on what people are not taking yet which is on reserve. Anecdotally from the lenders we have heard that people are typically taking it over a short period of time so over two to three years the bulk of the drawdown facility is being used,” Mr. Mirfin observed.

“These are people we know will come back and they do, but that amount of money when they come back never gets reported,” he added.

75 per cent of the equity release market was using draw-down products, amounting to £197 million in terms of overall lending, the equity release market monitor found out.

“If you put that back into the overall borrowing figure, that takes you to around £660 million which is actually ahead of where business was in 2006. In real terms you can see the market is even healthier than what the figures show,” said Mr. Mirfin.

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